STATE FINDS HUGE GAPS IN PUC’S BOOKS, FUNDS

Discrepancies are in the hundreds of millions after review of special funds

Sacramento 
The California Public Utilities Commission, charged with overseeing industries that charge more than $50 billion per year to utility customers, has failed to ensure that ratepayer dollars paid into certain special funds were accurately accounted for, state officials say.

Finance officials found some funds had revenue calculations that were off by as much as 73 percent, or $189 million, and program spending off by as much as 99 percent, or $212 million. Although no correlation has been proven, lawmakers worry that the faulty budget projections have contributed to recent rate increases.

The review covered 14 commission funds that collect surcharges on gas, electric and telephone bills. The money goes to subsidize low-income customers and for telephone services for the elderly, deaf and disabled.

After state parks officials were found to be hiding millions of dollars in special funds, Gov. Jerry Brown ordered his finance team to review all of the state’s more than 500 special funds. The Department of Finance probe uncovered discrepancies of more than $1 million in half of the special funds administered by the Public Utilities Commission.

Auditors said they found “significant weaknesses within CPUC’s budget operations which compromise its ability to prepare and present reliable and accurate budget information.”

Assemblyman Richard Bloom said the funds may have enormous deficits or significant surpluses where ratepayers have needlessly surrendered hundreds of millions of dollars.

“But because of poor accounting practices, we’re faced with a remarkable circumstance: We simply don’t know,” said Bloom, who chaired a recent Assembly budget subcommittee meeting on the matter.

The Santa Monica Democrat said the findings call into question the commission’s ability to account for the billions of dollars in accounts funded by ratepayers for electricity procurement, energy efficiency and a new program designed by the commission to begin funding clean energy technologies.

“It’s deeply troubling that an agency would have such dismal accounting and large amounts of public funds in apparent disregard of basic principles of good management,” Bloom said. “Best practices in management and accounting are widely known and understood, and there can be no excuse for not employing these practices.”

Given the limited scope of the finance audit, Bloom said he fears the issues uncovered have left deeper problems undiscovered.

“I hope that I am wrong,” he said. “But these concerns are all the more reason why the PUC must in my view act with urgency to restore confidence in this critical agency.”

PUC Executive Director Paul Clanon told lawmakers he agrees with nearly all of the findings in the audit, which he described as “painful for me to read.”

Clanon said the commission’s staffing levels may have been adequate a decade ago before the growth in special funds and the amount of money flowing through them. Today, that’s not the case, he said.

“The few people that we’ve had doing the processes, which were not fully documented, have been inadequately supervised and inadequately managed, including by me,” Clanon said. “Ultimately, I am the one who is responsible for the management of the commission, and for these problems, and for fixing them.”